Chip & PAIN? Some Cardholders Frustrated With Slow Transition

After about a month of inserting instead of swiping their plastic payment cards, many American consumers have strong opinions about the launch of chip-enabled credit and debit cards. While some are frustrated that chip transactions take a little longer than the old magnetic stripe purchases, they are far more worried that merchants have been sluggish to convert.

“The orange home improvement guys have theirs working. Everywhere else, I find the same among corporate retailers in Denver, insert doesn’t work, told to swipe,” wrote Christopher Toliver in a typical refrain on my Facebook page.

Rob Douglas, an ID theft expert who lives in Steamboat Springs, Colo., was a bit more forceful in his criticism.

“Almost none of the merchants in our small resort community have installed them,” he said. “Key word, resort. Resorts are famous for high levels of identity theft, and Steamboat is no exception. So, if any place could use them, it’s here. But most merchants tell me they’re too expensive.”

Chip-enabled credit cards — known as EMV cards — have been available to consumers and merchants for some time, but a shift in liability for fraud kicked in Oct. 1, making that date a serious deadline for conversion to the new payment cards. It was a deadline many merchants missed. While there haven’t been any widespread glitches associated with the changeover, there’s a lot more change to come. In September, The Strawhecker Group released survey results showing that only 27% of U.S. merchants would be EMV-ready by October — down from an estimated 34% in March.

That leaves consumers holding new chip cards as the payment equivalent of being all dressed up without a date.

A Big Expense for Small Businesses

In testimony before Congress earlier this month, the National Retail Federation essentially said, “Don’t blame us” for the slow uptake. New point-of-sale terminals for accepting chip cards cost up to $2,000 each, and that’s a bitter pill for small businesses to swallow, it said.

“The EMV transition is overwhelming and expensive for an independent, small retailer,” said Keith Lipert, owner of The Keith Lipert Gallery, a single-location, three-employee store in Washington, D.C. “Small retailers are entirely at the mercy and whims of the big players. We have no say and no way to use the marketplace to make our objections heard and our concerns valued.”

Consumers reacting to the delays weren’t particularly sympathetic to that. Many stores have chip-reader hardware, but haven’t updated their software yet, said reader Michael Ryan.”

“Get the … reader before the deadline, but take (your) sweet time activating the chip side,” he lamented. ”While hackers try new ploys to grab more data off the cards with chips too. This will just start the cycle all over again.”

There are a few complaints about the cards causing checkout line delays — it can take up to an extra 15 or even 20 seconds for a point-of-sale terminal to read an inserted chip card vs. a fairly instant swipe read.

“Most retailers don’t even have the chip reader turned on. When they do, it takes way too long. I always opt to just run it through the old way,” said Bree Biagi.

On the other hand, Lisa Ladonski didn’t mind the wait.

“The only problem I’ve had is that it takes a little longer for my card to be read. To be honest though, if it means my account is safer, I’m fine with that,” she said.

Other companies — most notably, Netflix — are noticing the transition to chip cards is affecting their sales, as consumers get cards with new numbers and don’t update automatic billing info. This could cause bigger problems down the road for consumers if bills go unpaid and get sent to collections, causing credit damage. (You can keep an eye on your credit scores for free every month on Credit.com to spot any unexpected drops that may indicate an unexpected collection.)

Randy Vanderhoof, director of industry group EMV Migration Forum, said a few bumps were to be expected, but he expected smoother sailing soon.

“The U.S. payments system is large and complex and we are still in the early days of the transition to chip payments,” he said. “There has been tremendous progress — card issuers are continuing to get cards in consumers’ hands, while retailers are making progress installing and enabling their terminals to accept the cards. As a result, the number of chip-on-chip (a chip card on a chip terminal) transactions are increasing rapidly and this ramp-up will continue through the holiday season and into 2016. It will likely be several years before we reach full implementation, though.”

But What About the PIN?

There is one universal complaint among consumers, however: That the U.S. took a half-step to chip and signature rather than a more secure leap to chip and PIN (personal identification number) technology. And there is also some complaining about…the complaining.

“Only in America would something as tragically simple as chip and PIN be so much trouble for people,” Amy Miller wrote.

To avoid any confusion during the transition, Vanderhoof said consumers should always swipe their cards first if there’s any doubt that a store’s chip readers are working.

“To reduce confusion during the transition, consumers with chip cards should swipe their cards as usual if they aren’t sure whether the retailer accepts chip cards, and follow the terminal prompts. If the retailer accepts chip cards, the terminal will instruct them to insert the card instead and guide them through the transaction,” he said. “If the consumer knows that the retailer accepts chip cards, they should go ahead and insert the card first; the terminal will guide them through the rest of the transaction.”